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Citi says Greek bond yield remains prohibitive

With its benchmark bond yield stuck between 4.3 and 4.4 percent, Greece’s cost of borrowing continues to be high, Citigroup warned in a note to clients, following statements by Finance Minister Euclid Tsakalotos earlier this week about drawing 7 billion euros from the markets.

The US company commented that as the Greek economy and its fiscal performance are slowly improving, there is a “generous cash buffer” that makes sense for Greece to use to pay off some of its existing “expensive” debt. Tsakalotos earlier this week said that Athens may use its 26-billion-euro cash buffer to buy back part of the loans of the International Monetary Fund and/or the European Central Bank.

However, Citi also stressed that the cost of financing from the markets remains high for Greece, with the 10-year bond yield adding three basis points on Thursday to 4.33 percent, so this country cannot yet rely on market funding.

Commenting on domestic political developments, Citi noted that Independent Greeks is expected to leave the government coalition, but as the partnership between ruling SYRIZA and the small nationalist party has already outlasted expectations, this “divorce” is hardly a surprise.